Verdict Overturned in Oil Royalties Case

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled that a defendant's intent to give or receive compensation for government services is a required element that the federal government must prove.

Aug 04, 2010

A federal appeals court has overturned the verdict against a senior economist at the U.S. Interior Department and POGO, the Project on Government Oversight, in connection with two 1997 lawsuits in which POGO claimed major oil companies had undervalued royalty payments to the Minerals Management Service for oil extracted from federal lands. MMS is no more, of course, having been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement after the Deepwater Horizon rig explosion and spill in the Gulf of Mexico.

The government intervened in POGO's lawsuits and settled with the defendant oil companies for $440 million. POGO received help during its investigation of the royalty payments from DOI Senior Economist Robert A. Berman, who agreed with POGO that he'd receive one-third of any money POGO recovered. More than four years after POGO paid him $383,600 in November 1998, the Justice Department filed a civil complaint charging both with violating 18 U.S.C. 209(a), which bars federal workers from accepting compensation from any other source "for services as an officer or employee of the executive branch of the United States government."

At trial in 2008, the judge refused a defense request to instruct the jury that intent to compensate Berman for his services as a government employee was an essential element of a 209(a) violation. The jury found against both POGO and Berman, and the trial judge assessed a penalty of $383,600 against Berman and $120,000 against POGO.

On Tuesday, the appeals court held that a defendant's intent to give or receive compensation for government services is indeed a required element of a 209(a) violation. While the statute says nothing about intent, it's important that the language in 209(a) that renders defendants civilly liable also makes them guilty of a criminal offense, the court said, citing a long line of U.S. Supreme Court cases that found the omission of any mention of intent will not be construed as eliminating intent from a criminal offense. And because the violation hinges upon payment made "as compensation," the intent of the payor must be determined, the judges ruled.

The decision notes that POGO's check to Berman indicated it was a "Public Service Award," and an accompanying letter said it was awarded to him for his "decade-long public-spirited work to expose and stop the oil companies' underpayment of royalties for the production of crude oil on federal and Indian lands."

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